A Texas trade group said tariffs on aluminum and steel will have ripple effects across a state economy with a strong manufacturing sector. Photo by Stephen Shaver/UPI | License Photo
July 2 (UPI) -- Parts of the energy sector still in recovery mode will be hit by U.S. tariffs on aluminum and steel and hurt the broader Texas economy, a trade group said.
Texas is the largest oil producer in the United States and its Permian shale basin is on pace to become one of the more significant contributors to future gains in global output. Production trends, however, are outpacing existing pipeline capacity, a trend that's raising alarm bells given U.S. President Trump's trade policies.
"This will ultimately result in fewer wells being drilled, a net loss of American jobs, lost tax revenue and a slow down in energy infrastructure investment," Ed Longanecker, the president of the Texas Independent Producers & Royalty Owners Association, told UPI during the weekend. "This at a time when we are facing significant takeaway capacity challenges in West Texas and the upstream sector remains in recovery mode following several years of depressed commodity prices."
Upstream refers to the exploration and production side of the energy sector. A June survey from the Federal Reserve Bank of Dallas showed the hours-worked index for upstream was close to an all-time high, though the wages and benefits index declined. Prices for the services companies provided by upstream companies like Baker Hughes, meanwhile, are already on the rise.
The U.S. Commerce Department in January concluded the amount of imports threatened U.S. national security.
"The reports found that the excessive level of imports threatened to impair the national security because further closures of domestic production capacity would result in a situation where the United States would be unable to meet demand for national defense and critical infrastructure in a national emergency," the Trump administration stated.
Longanecker's comments follow calls for support last week from Todd Staples, the president of the Texas Oil & Gas Association. To propel the president's call for energy dominance, Staples said the U.S. energy sector needs pipelines made from steel that few domestic operators produce.
Texas Gov. Greg Abbott, a Republican, said that, for every job expected to be secured by the tariffs, at least one job is lost in the oil and gas sector.
"To put this into further perspective, in 2017, the Texas upstream oil and natural gas industry alone purchased goods and services from over 900 different U.S. industry sectors in the amount of $26.7 billion, 81 percent of which came directly from Texas businesses," Longanecker added. "These industries will also suffer."
The U.S. Census Bureau found 40 percent of total steel imports last year came from Canada, Mexico and the European Union, with Canada accounting for the bulk of the deliveries with around 9 million tons. After tariffs were announced earlier this year, the Canadian Steel Producers Association said it was dismayed.
The Canadian government on Sunday imposed tariffs on about $12.5 billion worth of U.S. goods, intended to be proportional to steel and aluminum tariffs. The new tariffs place a 25 percent tax on more than 40 U.S. steel products and a tax of 10 percent on more than 80 other items such as toffee, maple syrup, coffee beans and strawberry jam.